Last month, the
District of Columbia City Council gave final approval to “The Clean and
Affordable Energy Act of 2008,” a bill designed to provide the foundation
for new and innovative programs to conserve energy, reduce emissions of
carbon dioxide, stimulate renewable power generation, and stabilize energy
costs.

The act establishes
clear goals for energy efficiency and renewable energy in the District by,
for example, reducing per-capita energy consumption; increasing renewable
energy generating capacity; reducing the growth in peak power demand;
improving the energy efficiency of low-income housing; reducing demand
growth for the District’s largest energy users; and fostering development of
green-collar jobs.

A provision in the
bill calls for a private contractor, known as a “sustainable energy utility”
(“SEU”) to develop, coordinate and provide programs to promote the
sustainable use of energy in the District. To fund the SEU, existing
electricity and natural gas efficiency surcharges are replaced with utility
assessments that are directed to a newly created fund called the Sustainable
Energy Trust Fund (“SETF”). The amount of the assessment will be $.0011 per
kilowatt-hour on electricity sales beginning in fiscal year 2009 and will
then increase to $.0015 per kWh after 2011. The amount of the assessment
will be $.011 per therm on natural gas sales beginning in fiscal year 2009,
and will then increase to $.014 cents per therm after 2011.

The bill also
creates an Advisory Board (the “Board”) to develop performance benchmarks
for the provision of sustainable energy services and ensure the SEU contract
meets the objectives established by the bill. The Board will consist of
members appointed by various groups, both in the public and private sector,
including the mayor’s office, the public service commission, environmental
groups, electric and natural gas utilities, and the low income community.
This structure of the Board will ensure robust public participation and
oversight of the SETF and SEU.

The renewable energy requirements have greatly increased under this new
legislation. Beginning in 2009, the bill mandates that a total of 5% of
electricity come from renewable energy sources, divided equally between tier
one and tier two renewable resources, with no less than 0.019% from solar
energy. The renewable energy requirements increase incrementally on a
yearly basis with the portion of tier one renewable resources increasing and
the tier two renewable resources decreasing until 2020, when 20% of
electricity must come from tier one renewable sources, 0% from tier two
renewable sources, and not less than 0.4% from solar energy.

The bill, thus, increases the requirement of renewable energy from 11% in
2020 as is the current mandate to 20% in 2020. Electricity suppliers must
buy solar from local sources under a contract of at least 15 years in
duration and may obtain renewable energy credits from jurisdictions outside
of the District only after exhausting all opportunity to meet their
obligation through solar systems connected to the grid within the District.

If an electricity
supplier fails to comply with the renewable energy portfolio standard for
the applicable year, the electricity supplier must pay a compliance fee of
$.05 for each kilowatt-hour of shortfall from required tier one renewable
sources and $.01 for each kilowatt-hour of shortfall from required tier two
renewable sources. For each kilowatt-hour of shortfall from required solar
energy sources, an electricity supplier will be charged a compliance fee of
$.50 from 2009 until 2014, $.40 from 2015 until 2016, $.30 in 2017 and 2018,
$.20 in 2019 and 2020, $.10 in 2021 and 2022, and $.05 in 2023 and on.

Tier one renewable
sources include the following types of energy: solar energy, wind,
qualifying biomass, methane from the anaerobic decomposition of organic
materials in a landfill or wastewater treatment plant, geothermal, ocean,
including energy from waves, tides, currents, and thermal differences, and
fuel cells producing electricity from qualifying biomass, landfill, or
wastewater treatment plant. Tier two renewable sources mean hydroelectric
power other than pumped storage generation and waste-to-energy.

District Mayor
Adrian Fenty signed the bill on August 4, 2008, and it now goes to Congress
for approval.